London close: Stocks turn weaker amid global growth concerns

(Sharecast News) - London stocks had slipped below the waterline by the close on Tuesday, amid ongoing concerns about inflation and economic growth. The FTSE 100 ended the session down 0.12% at 7,598.93, and the FTSE 250 was off 0.52% at 20,399.43.

Sterling was in the green, meanwhile, last trading 0.41% higher on the dollar at $1.2583, and gaining 0.4% against the euro to €1.1763.

"Fears about high levels of inflation and the prospect of further interest rate hikes are doing the rounds," said Equiti Capital market analyst David Madden.

"The US 10-year yield traded above 3% earlier today, while this time last week it was below 2.75%.

"A rise in yields typically means the bond market is pricing-in more rate hikes."

Madden noted that, even though the minutes from the latest Federal Reserve meeting were "not as hawkish as expected", it still looked likely that the Fed will hike rates by 50 basis points this month, and in July.

"CPI in the US is 8.3%, so should rates be lifted by 1% over the next two months, that is likely to compound the cost-of-living situation.

"In keeping with the theme of the past few weeks, the US tech sector experienced the biggest jump in volatility amid relatively elevated bond yields.

"Once again, London-listed commodity stocks are helping the FTSE 100 as the British index is basically flat on the day, while continental indices are in the red."

Sentiment began the day fragile after the Reserve Bank of Australia delivered a bigger-than-expected interest rate hike.

The Bank lifted rates by 50 basis points to 0.85% as it looks to curb inflation, ahead of the 25-basis point hike pencilled in by analysts.

"The move has just poured a bit of cold water on yesterday's risk-on mood, which had already cooled somewhat following the rise in US bond yields last night as the 10-year Treasury climbed back above 3% to its highest level in a month," said Neil Wilson, chief market analyst at Markets.com.

"We know rates are rising near-term so the question is one of whether the stock market has adjusted to this yet.

"On that front, the real uncertainty lies in earnings and whether inflation has peaked - US CPI later this week is important on that front."

In economic news, the World Bank cut its global growth forecast earlier as it said the Ukraine conflict had compounded damage from the Covid-19 pandemic and warned over the risks of stagflation.

In its Global Economic Prospects report, the Bank said it now expected global growth in 2022 to slump to 2.9% from 5.7% a year earlier, down from a forecast of 4.1% growth in January.

It was expected to hover around that pace over 2023-24, "as the war in Ukraine disrupts activity, investment, and trade in the near term, pent-up demand fades, and fiscal and monetary policy accommodation is withdrawn", the World Bank said.

"As a result of the damage from the pandemic and the war, the level of per capita income in developing economies this year will be nearly 5% below its pre-pandemic trend."

On home shores, the latest data from the British Retail Consortium showed that retail sales fell in May as the cost-of-living crisis and soaring inflation squeezed consumers further.

A separate survey out earlier showed that UK business growth slowed sharply in May as surging inflation hit home.

The S&P Global/CIPS UK services PMI business activity index fell to 53.4 last month from 58.9 in April, the weakest headline reading since February 2021, when the country was in lockdown.

Once falls caused by Covid-19 lockdowns were stripped out, the month-on-month decline was the largest since the survey began in July 1996.

May's reading was, however, ahead of the flash estimate of 51.8.

"May data illustrates a worrying combination of slower growth and higher prices across the UK service sector," said Tim Moore, economics director at S&P Global Market Intelligence.

"Service providers are increasingly concerned about the near-term business outlook, with price resistance among consumers and escalating cost of living pressures set to dampen spending during the second half of 2022."

On the continent, eurozone construction activity fell in May for the first time in nine months, moving into contractionary territory amid supply chain issues and rising prices.

The S&P Global construction purchasing managers' index for the bloc declined to 49.2 from 50.4 in April, making the sharpest contraction recorded for 15 months.

That was attributed to higher raw material prices and supply chain disruptions dampening output and demand.

German factory orders unexpectedly fell in April, meanwhile, amid supply chain issues, according to figures released earlier by Destatis.

Factory orders declined by 2.7% on the month following a revised 4.2% drop in March, missing expectations for a 0.3% increase.

It marked the third straight monthly decline and was driven by a fall in foreign orders, which slumped 4% on the month following a 5.8% drop in March.

Domestic orders were down 0.9% on the month.

Across the pond, America's shortfall on trade with the rest of the world registered an outsized drop in April - and some economists believed that it was set to stop being a drag on economic growth over the remainder of 2022.

According to the US Department of Commerce, in seasonally adjusted terms the total foreign trade deficit collapsed at a month-on-month pace of 19.1% to reach $87.1bn.

That was better than a preliminary estimate of $89.7bn.

On London's equity markets, JD Sports Fashion was down 3.89% after the Competition and Markets Authority said that it had provisionally concluded that JD and rival retailer Elite Sports fixed the retail prices of a number of Rangers-branded replica kits and other clothing products from September 2018 until at least July 2019.

Retailers more generally were under pressure, with B&Q owner Kingfisher down 3.37%, online supermarket Ocado off 3.22%, Marks and Spencer 2.88% and discount retailer B&M European Value Retail 1.25% weaker, most likely on the back of the BRC data.

National Express Group tumbled 9.46% after the transport operator said revenue continued to track close to pre-pandemic levels, but reiterated that in the short-term, the recovery in profitability will lag the revenue recovery.

On the upside, waste management specialist Biffa rocketed 27.2% after saying it had given the green light to a proposed takeover approach worth £1.36bn.

The company said it had received a series of unsolicited, indicative proposals from affiliates of Energy Capital Partners, the private equity firm, and following talks, a possible cash offer of 445p per share has been proposed.

Elsewhere, Rio Tinto Group was up 2.27% and Anglo American was 1.29% higher, after Jefferies upgraded its rating on the miners to 'buy' from 'hold' and hiked the price targets, arguing that the sector was undervalued and poised to recover.

"We had expected a demand soft patch to lead to a period of lower commodity prices, with a shift in policy needed to spark a gradual recovery in Chinese demand," the bank said.

"That shift is arguably here - while macro risks are clearly elevated and mining shares should be volatile, the sector is undervalued and poised to outperform as China recovers."

Outside the FTSE 350, Ted Baker shares plunged 18.42% after the fashion retailer said its preferred bidder had pulled out of takeover talks.

Ted Baker had not named the preferred bidder, but it was widely reported to be Authentic Brands, the owner of Juicy Couture and Reebok.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Abigail Townsend and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,598.93 -0.12% FTSE 250 (MCX) 20,399.43 -0.52% techMARK (TASX) 4,384.96 -0.32%

FTSE 100 - Risers

Melrose Industries (MRO) 142.10p 3.12% Rio Tinto (RIO) 6,091.00p 2.27% AstraZeneca (AZN) 10,230.00p 1.57% GSK (GSK) 1,719.60p 1.45% BP (BP.) 446.50p 1.37% Anglo American (AAL) 4,017.50p 1.29% British Land Company (BLND) 536.00p 1.13% Whitbread (WTB) 2,701.00p 1.05% British American Tobacco (BATS) 3,566.00p 0.95% Shell (SHEL) 2,416.00p 0.90%

FTSE 100 - Fallers

JD Sports Fashion (JD.) 118.45p -3.89% Intermediate Capital Group (ICP) 1,544.50p -3.41% Rightmove (RMV) 573.60p -3.40% Kingfisher (KGF) 257.80p -3.37% Ocado Group (OCDO) 920.80p -3.22% Howden Joinery Group (HWDN) 670.60p -2.92% 3i Group (III) 1,214.00p -2.88% Sainsbury (J) (SBRY) 221.40p -2.81% London Stock Exchange Group (LSEG) 7,126.00p -2.76% Abrdn (ABDN) 191.25p -2.72%

FTSE 250 - Risers

Biffa (BIFF) 413.40p 27.20% Mitie Group (MTO) 61.30p 5.33% Capricorn Energy (CNE) 213.40p 2.89% Playtech (PTEC) 563.00p 2.09% Centrica (CNA) 84.88p 2.04% Hipgnosis Songs Fund Limited NPV (SONG) 114.00p 1.97% Coats Group (COA) 70.60p 1.88% Essentra (ESNT) 324.50p 1.72% FirstGroup (FGP) 138.30p 1.69% Telecom Plus (TEP) 1,748.00p 1.63%

FTSE 250 - Fallers

National Express Group (NEX) 245.00p -9.46% Ferrexpo (FXPO) 184.20p -4.66% Future (FUTR) 1,888.00p -4.26% Genus (GNS) 2,608.00p -4.19% IP Group (IPO) 79.50p -3.99% Bridgepoint Group (Reg S) (BPT) 324.80p -3.62% Molten Ventures (GROW) 508.00p -3.54% Network International Holdings (NETW) 217.00p -3.47% Discoverie Group (DSCV) 719.00p -3.36% Greggs (GRG) 2,174.00p -3.29%